Many law departments, under pressure to control expenses, are wielding outside counsel guidelines as a key tool to control costs. According to Karoline Jackson and Shanna Davidson of Barnes & Thornburg, this is forcing law firms to rake positive steps of their own.
CCBJ: What changes are you seeing in the legal industry with regard to outside counsel guidelines?
Shanna Davidson: What we are seeing in the legal industry is that many clients are facing increased pressure to manage their corporate legal budgets. For most companies, outside legal spend is considered a line item expense, and this added pressure on clients to manage their internal budgets is having a downstream effect on outside counsel. As a result, many clients are now using outside counsel guidelines as a way to drive change with their outside counsel firms.
A positive change we are seeing, because of these internal changes, is that many law firms are now responding with their own centralized process improvement initiatives. Since a law firm’s retention of clients is often dependent on compliance with these guidelines, we see more law firms developing their own legal operations departments. Over time, we think that the institutionalization of legal operations will maximize the value of efficiencies across all departments and help build sustainable, outcome-driven partnerships with clients.
Why is managing these guidelines so important?
Davidson: From a client’s perspective, outside counsel guidelines are a way to bring predictability and standardization to all of the law firms that work with a company. However, from a firm’s perspective, outside counsel guidelines are not standard, because each client has its own requirements. While this can be challenging, it also can be viewed as a positive, because the variety helps us identify trends in what the client values; then law firms can proactively collaborate with those clients on those issues throughout the year. For example, starting discussions of rate renewals early or scheduling law firm efficiency reviews.
There are organizations like the Corporate Legal Operations Consortium that have made strides to improve and formalize templates for outside counsel guidelines. Guidelines will become more standardized over time, which will in turn, limit friction around the client/law firm relationship.
How are law firms responding to this change?
Karoline Jackson: Outside counsel guidelines are still a challenge for law firms, especially in terms of billings and collections. We see law firms establishing multi-departmental processes to address these challenges – and, in particular, to make sure we are following the outside counsel guidelines. Because there are not standard outside counsel guidelines for each client, it does create operational challenges for the law firm.
What we’ve done, and what we’ve seen others doing, is have our general counsel’s office and our legal operations department team up to create a multi-departmental task force to improve workflows around reviewing and approving guidelines and ensuring that the guidelines are followed. Firms are engaging IT, accounting, general counsel, professional responsibility, records management, etc. earlier in the process to ensure compliance. Once a guideline is received, these different departments are triggered to review, respond to, and follow the guidelines. For as many clients as a law firm typically has, that can be a difficult process. We are seeing firms setting up operations in such a way that someone or a team of people own that process and are making sure each responsible stakeholder is following those guidelines.
The ultimate goal is to increase guideline visibility throughout the firm, not only for the lawyers, but also for the administrative departments, and to push for validation of the guidelines earlier in the billing cycle. As a key performance indicator (KPI), we hope that a reduction in guideline violations will mitigate invoice rejections and increase client satisfaction.
What are law firms doing to be more aligned with outside counsel guidelines?
Jackson: What we see as most important is identifying the right people and process to improve the contract management workflow. Before you try to implement new technology or tools to automate the process, it all comes down to making sure you have the right people in place – people who own the process and make sure that the work is done correctly and efficiently. It is important to build processes around reviewing those outside counsel guidelines at client intake or when a revision to an outside counsel guideline is made for an existing client. The goal is to centralize where those contracts are stored, not only from an electronic standpoint, but also in terms of who has responsibility for portions of those contracts. By extracting key information from the guidelines and setting validation rules to warn key stakeholders when there are possible upcoming violations, you can make sure that you don’t run afoul of any of the client’s technical requirements.